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TEXT-Bank of Korea's statement on rate policy

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SEOUL, Oct 11 (Reuters) - Following is the full text of astatement released by South Korea's central bank after it cutinterest rates for the second time this year on Thursday, asexpected:

"The Monetary Policy Committee of the Bank of Korea decidedtoday to lower the Base Rate by 25 basis points from 3.00percent to 2.75 percent."

"Based on currently available information, the Committeeconsiders the economic recovery in the U.S. to have continued,albeit at a moderate pace, but the sluggishness of economicactivities in the euro are to have deepened. Growth hascontinued to slow in emerging market countries as well, duemostly to the impact of the economic slumps in advancedcountries. The Committee expects the pace of global economicrecovery to be very modest going forward and judges the downsiderisks to growth to be large, owing chiefly to the spillover ofthe euro area fiscal crisis to the real economy and to thepossibility of the so-called fiscal cliff materializing in theU.S."

"In Korea, the Committee appraises economic growth to havebeen weak, as exports and domestic demand have both beenlackluster. On the employment front, amid its continued uptrendled by the higher age groups and the service industry, thenumber of persons employed has increased by a greater margin inthe manufacturing sector as well. Going forward, the Committeeanticipates that the negative output gap in the domestic economywill persist for a considerable time, due mostly to theprolongation of the euro area fiscal crisis and to the enduringsluggishness of the global economy."

"Consumer price inflation and core inflation excluding theprices of agricultural and petroleum products continued to runat low levels at 2.0 percent and 1.4 percent respectively inSeptember. The Committee forecasts that inflation will remainbelow the 3.0 percent midpoint of its target for the time being,owing primarily to the easing of demand-side pressures anddespite the influence for example of international grain pricestability. As for housing prices, those in Seoul and itssurrounding areas declined at a somewhat faster pace, and thosein the rest of the country generally stabilized at their levelsof the previous month."

"In the financial markets, stock prices have risen and theKorean won has appreciated against the U.S. dollar, due mostlyto the improvement in international financial market conditionsand to inflows of foreigners' securities investment funds inconsequence of the additional quantitative easing policies ofmajor advanced countries. Long-term market interest rates havedeclined slightly, primarily on concerns about the economicslowdown."

"Looking ahead, the Committee will closely monitor externalrisk factors and the consequent changes in financial andeconomic conditions at home and abroad, and conduct monetarypolicy so as to stabilize consumer price inflation at theinflation target over a medium-term horizon while continuing itsefforts to lower inflation expectations and ensuring that thegrowth potential is not eroded."

(Writing by Christine Kim; Editing by Choonsik Yoo)

((christine.kim@thomsonreuters.com)(822 3704 5665)(ReutersMessaging: christine.kim.thomsonreuters.com@reuters.net))

Keywords: KOREA ECONOMY/STATEMENT